In this article, we will find the answer to the question ‘Who owns Keystone Pipeline?.
Introdution
The Keystone Pipeline or more specifically the Keystone XL pipeline has to be one of the most controversial environmental battles fought. From its initial proposal by TC Energy in 2008 up until the present, the project has gone through quite a bit.
The project almost saw its end in November of 2015 when then-President Obama, completely vetoed the pipeline. The main problem bought to the forefront in building the pipeline was that it proved to be a threat to the ecosystem overall.
What is Keystone XL?
Before we get into the nitty-gritty details of the problems surrounding this very controversial project, we can take a step back and understand what it is. The project was to build a pipeline extension intended to transport fossil fuel to the market as fast as possible.
Just to preface there is an already existing Keystone Pipeline System since 2010, sending Canadian tar from Alberta to many processing centers across the United States. On top of that, there is a rough count of 3 million miles being occupied by gas and oil pipelines at present across the country.
What are Tar Sands?
Part of the reason the Keystone Pipeline XL is facing so much flack is because of the fuel that it’s intended to carry called Tar Sands.
Coming from the northern boreal forests in Alberta, it’s a sludgy, mucky deposit. These deposits contain bitumen, which is a form of petroleum that can be refined to be used as fuel. The extraction process is very costly and takes a toll on the environment as well.
But with demand, oil companies did not really have much of a choice other than to ramp up production and look for more potential areas they could extract from.
Pipeline Map
The project consists of two key segments. The first being a southern leg, which surprisingly has already been completed and runs through Cushing, Oklahoma, and Texas. The opposition to this project, the Gulf Coast Pipeline, claims that TC Energy utilized legal loopholes to go through with the project in this part. Supposedly, the U.S. Environmental Protection agency’s vetting process for a permit was not done properly.
The second segment is the one that has not been constructed and is facing a lot of controversies even now. It is a 1209-mile-long segment that would potentially go through Hardisty, Alberta, Montana, South Dakota, Steele City, and finally Nebraska.
The second stretch or the northern leg was initially unable to begin because the U.S. State Department, under Barack Obama, did not grant the permits that were required for the project to begin construction.
In contrast, when Trump came to power, he granted the permit and removed what was legal, regulatory, and economic obstacles in the pipeline becoming a reality.
Who owns and funds this project?
It is only natural for one to wonder just how much money is behind this huge project, that continues to be highly controversial.
The pipeline has received massive subsidies from the Government of Alberta. On March 31, 2020, TC Energy went on to make a Final Investment Decision to initialize the project. This was after the affirmation of the subsidy commitment from the Government of Alberta.
The subsidy commitment involved a confirmation from Alberta to directly invest in the project. It also required that they provide a guarantee for a multi-billion-dollar loan.
A more detailed breakdown is that the Government of Alberta would directly invest USD $1.1 billion that would serve as equity in the project. The same amount would act to finance construction throughout 2020.
Adding to this amount, Alberta would then go on to provide a USD $4,2 billion loan guarantee that would serve to cover the costs of the project in the 2021-22 period of construction.
The secondary loan would most likely be undertaken by private banks. The Alberta government has gone a step further, in saying that they themselves would pay back the loan in the scenario where TC Energy was unable to.
After these big announcements were made, big banks like JPMorgan Chase, Citi and, RBC came out and helped TransCanada Pipelines release two new bonds.
The short answer to who funds this project is banks and insurance companies. This is only natural because there is no official project finance package, so there is an overwhelming reliance on banks that are willing to make general corporate loans.
JPMorgan Chase continues to be the primary banker of Keystone XL. In fact, they are the primary bank for most of the loans that involve TransCanada Pipelines Ltd.’s loans. TC Energy currently has three loans with JPMorgan Chase worth roughly USD $7.8 billion. JPMorgan Chase served as the liaison between TC Energy and its lenders on all loans leading up to this project and many others.
JPMorgan has acquired the status of being the world’s biggest banker in projects related to fossil fuels. This can mostly be attributed to their close dealings with TC Energy.
There are at least 18 other global banks supporting this pipeline project, such as Bank of America, Citi, Wells Fargo, Barclays, HSBC, and Deutsche Bank to name a few.
Coming to insurance companies, it is the simple truth that huge projects such as this require heavy insurance coverage. This is where insurance giant Liberty Mutual has provided a $15.6 million bond that acts to cover risks related to the construction of the pipeline.
TC energy is also looking to procure more insurance companies to ensure maximum coverage over multiple aspects regarding the Keystone Pipeline XL.
People’s Reaction to the Pipeline
Because the pipeline poses such a threat to the ecosystem, people did not take to the project lightly. The project faced a lot of protest from various environmental activists and organizations in the U.S. and across the globe. Indigenous communities, religious leaders, farmers, ranchers and business owners who are directly or indirectly affected by the pipeline have also stepped in.
The situation escalated to the point where civil disobedience was staged outside the White House in August of 2011, which lead to the arrest of many people. Famous people such as Dalai Lama and former president Jimmy Carter have opposed this project and expressed displeasure at it publicly.
What is an even more scary fact is that the fossil fuel giants spent a rough amount of $700 million to gain allies in Congress. As a result, when these politicians took charge, their first order was to pass a bill to speed up the approval of the Keystone XL pipeline.
People who support the pipeline claim that the extraction and utilization of tar sands in the global oil market will take place regardless of whether or not Keystone XL is built. These people insist that if a pipeline is not built, the company would then move to rail to transport the crude oil.
While this may sound practical, the truth is that the whole process of dealing with tar sands oil is an expensive venture, shipping it by rail will only add to what is already a major project. Therefore, without the Keystone XL pipeline, the tar sands industries would have to forcefully cancel projects rather than shift to rail, for economic reasons.
False Claims by the Oil Industry
Since the project proved to be controversial the oil industrialists went a step further in saying that if the pipeline was built it would create more job vacancies. The figure quoted by them was a high 119,000 jobs. This was later found to be faulty as the State Department came out saying that the project would only create roughly 2000 job openings.
Another claim made was that the pipeline would lower gas prices across the United States. While this would have been ideal, the harsh reality remains that most of the Keystone XL would be shipped overseas. This would negatively affect the market in the U.S. and lead to higher oil prices overall.
Trump’s involvement with the Keystone XL Pipeline
While the Obama administration quite shockingly refused to grant the cross-border permit which was quintessential for the project. It set a precedent and served as a reminder to the oil barons that there was an overall disdain for the project from the world. The Obama-era decision set the backdrop to prove that the pipeline failed to serve the nation’s interests.
Trump, on entering the office, quickly displayed that his intentions were different. On his fourth day in the Oval Office, he signed an executive order that allowed the project to move forward. His administration went a step further in approving an illegal cross-border permit. But severe opposition from various groups proved to stall the project and only ended up adding the pipeline to Trump’s long list of failures.
Conclusion
As of right now, the Biden administration which is currently in power has severely opposed the project. Hopefully, the project remains unfulfilled which ultimately ensures a cleaner future for the country and a push for cleaner energy sources.
Frequently Asked Questions
- Isn’t the pipeline essential in keeping with global oil demand?
While this is partly true. Giving in to such demands only ensures that cleaner sources of energy are not adopted and put into use.
- What can we do to prevent the building of this pipeline?
Make our voices heard through various public forums and social media. Join protests wherever possible.
